Correlation Between GM and Nuveen Preferred

Can any of the company-specific risk be diversified away by investing in both GM and Nuveen Preferred at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and Nuveen Preferred into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between General Motors and Nuveen Preferred And, you can compare the effects of market volatilities on GM and Nuveen Preferred and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of Nuveen Preferred. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Nuveen Preferred.

Diversification Opportunities for GM and Nuveen Preferred

0.63

Correlation Coefficient

GM  Nuveen Preferred

Poor diversification

The 3 months correlation between GM and Nuveen is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Nuveen Preferred And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuveen Preferred And and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with Nuveen Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuveen Preferred And has no effect on the direction of GM i.e., GM and Nuveen Preferred go up and down completely randomly.

Pair Corralation between GM and Nuveen Preferred

Allowing for the 90-day total investment horizon General Motors is expected to generate 1.9 times more return on investment than Nuveen Preferred. However, GM is 1.9 times more volatile than Nuveen Preferred And. It trades about 0.05 of its potential returns per unit of risk. Nuveen Preferred And is currently generating about -0.04 per unit of risk. If you would invest  3,805  in General Motors on September 3, 2024 and sell it today you would earn a total of  1,754  from holding General Motors or generate 46.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	30.71%
Values	Daily Returns

General Motors  vs.  Nuveen Preferred And

General Motors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, GM displayed solid returns over the last few months and may actually be approaching a breakup point.

Nuveen Preferred And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuveen Preferred And has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, Nuveen Preferred is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GM and Nuveen Preferred

The main advantage of trading using opposite GM and Nuveen Preferred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Nuveen Preferred can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Nuveen Preferred will offset losses from the drop in Nuveen Preferred's long position.

The idea behind General Motors and Nuveen Preferred And pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.